Key to the success of the QTT: QTT and Token Economic System
On September 14th, the Chinese content and news aggregator company, Qutoutiao was officially listed on Nasdaq under the ticker symbol “QTT.” QTT’s price had an incredible surge on the first day of trading, triggering the circuit breaker five times. The share closed at $15.97 on Friday which rose by 128% from its $7/ADS initial offering price and by 30% from its $9.1/ADS opening price. Based on the closing price, QTT reached a market value of $4.5 billion.
QTT broke the time record of Chinese startup companies going IPO in the US market; it took only two years and three months since it was started. QTT app acquired more than 6 million users within ten months after its initial launch in June 2016. One year later, QTT ranked as №5 News app in Chinese App Store. In December 2017, the number of daily active users of the app was nearly 10 million. Its dramatic expansion attracted attention from Tencent, one of the top 3 tech companies in China. The giant then invested $200 million to QTT as the leading investor in this March. Six months later, QTT went to IPO.
Rapid user growth is a key factor that leads QTT to success, and I think the token usage is the most significant reason why QTT is able to grow so fiercely. If you are familiar with the idea of the blockchain, you must have known token is one of the core mechanism that makes blockchain a break-through technology. Though QTT is not a blockchain company, it does set a great example to demonstrate the power of the token. I would like to introduce below the idea of the token and how QTT uses the token to expand its growth.
What is Token?
The concept of the token is gradually becoming popular with the development of blockchain technology. It is a multi-purpose instrument that can be applied to different scenarios.
The token act as a value exchange instrument. Users are able to exchange token with other things within a closed organization. Take the coins used in the online video game as an example, coins can be used to buy virtual equipment in the game, and a player can pay coins to another player in exchange of certain virtual service. In this scenario, coins play the role of token that enables value exchange.
The token act as an earning instrument. A great example is the tokens traded in the secondary market, such as ETH and EOS. Sellers and buyers treat tokens in the market the same way as the stock. They buy the token at its lower price and sell it at its higher price for profit.
The token bestows the owner’s rights. When the token is playing as the instrument of right, we can basically equate it to the shareholders’ stock. It grants the owner rights of governance and voting.
Token economic model of QTT
Where is the token from, and how can we get these tokens?
For the blockchain product, users receive token automatically, which is generated by the blockchain algorism, when they prove they’ve done certain works. Usually, the work is solving a complicated math problem. We call it the Proof of Work. However, QTT is not built on blockchain technology. So there is no work for users to solve from the algorism level. Instead, the platform manually designs different tasks and rewards users with gold coins once they complete the tasks.
Below are some tasks designed by QTT
A. Invite friends to register, read articles for a certain period of time, or click the advertisement.
B. Become a master and recruit apprentices. The master share profit from apprentices.
C. Create content for the platform.
D. Shop on the platform.
What can users do with the Gold Coin?
QTT repurchases Gold Coins with RMB (Chinese currency) at a fixed time. The purchasing price is determined by the revenue of the company. So far, the purchasing price stays stable in general. The only limitation is that users must redeem the Gold Coin before the expiration date; otherwise, the Gold Coin will be voided and cannot be retrieved.
Why do users want Gold Coin?
Linking Gold Coin to RMB (Chinese Currency) is a very strategic and effective move. QTT users want Gold Coin because of its ability to change to RMB, the legal currency. Who doesn’t want to click a button and get real money? Another reason is that the price of the Gold Coin is determined by the revenue of the company. It is very possible that users take actions to promote the app just to keep the revenue from falling. If Gold Coin only circulate within the app, and if the price of the coin has nothing to do with the company’s revenue, it’s hard to imagine users take actions completing the task.
The similarity between Gold Coin of QTT and token of the blockchain company
Except for the technology, Gold Coin share several common things with the token issued by the blockchain company. First, they are all rewards for the work users have done. The more work users complete, the more tokens they earn. Second, they all can be traded and cash out. Both Gold Coin and tokens can be traded with another party, and exchange to legal currency. Furthermore, the development of both organization depends on decentralization. Token issued by blockchain organization is decentralized in nature. On the other hand, QTT is a centralized platform, but it depends its growth solely on the token system and decentralized users. Therefore, QTT chooses a decentralized strategy.
Not all blockchain organizations design their token system as well as QTT. These companies haven’t taken full advantage of the token. QTT has gained numerous users and high stream profit through the token mechanism. It is reasonable to assume that blockchain companies could achieve or exceed the same level of success as QTT.
How can blockchain companies take advantage of the token economy?
For numerous blockchain companies that are trying to succeed in the rising token economy, here are some lessons that can be learned from QTT’s token system design:
Empower token with value.
As said earlier, the token has less value if it cannot be cashed out, but only traded on the cryptocurrency market. Application scenario is necessary to increase the token value. Again, Gold Coin is valuable not because it is a virtual coin, but a virtual coin that can be exchanged to RMB at the rate of the day.
Build the trust
Users work hard to earn Gold Coin for the trust on QTT. The trust is accumulated gradually every time QTT purchase the coin on time. We can conclude that the token economy builds on trust, and it will operate well as long as there is trust, whether the token is issued by the blockchain company or not. Fortunately, blockchain technology is designed to increase trust. The algorism decentralizes the power from a centralized organization to every user and distributes tokens automatically once they complete the work. There is no need to be concerned that the blockchain organization will delay or even cancel the payment. So, blockchain empowers the Token Economy.
Product value and the number of users are the keys
Most of the blockchain projects at the market, including public chain projects and Dapps, are focusing on ICO instead of designing a great product with actionable application scenarios. Those projects may tell a good story that attracts token buyers, but they fail to acquire real application users. Without the application scenarios, the token issued by those projects will end up being numbers in your cryptocurrency wallet.
Compared to the speculative projects, QTT creates a user-liked product and builds up an application scenario for the Gold Coin. No wonder it can acquire a large number of users for a short time.
If your organization wants to take advantage of the blockchain technology, I would suggest you do a case study on QTT, especially on how the token mechanism operates in its system. Its token system is much better than most of the blockchain projects, though it is not a blockchain company.
When I am designing my blockchain application, I keep telling myself that technology is the only foundation of a great product. The actionable application scenarios and a viable business model are keys to a product with true value. This is what I learned from QTT. If you are neither pursuing short-term revenue nor numbers on cryptocurrency stock market; I’ll suggest you think the same.
Article author：Wayne Wong
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